Why Layoffs Don’t Reduce Costs

When a business’s revenue begins to shrink, management often turns to downsizing headcount as a way of quickly reducing expenses by 10-30% in order to stay competitive and alleviate the cost containment concerns of shareholders. However, research shows that this knee-jerk reaction often fails to be the magic pill a company is hoping for.

There is a growing body of research that shows that firms incur big costs when they layoff workers. Some are obvious like severance and outplacement. Others are much less tangible, such as the impact on morale and productivity of remaining employees, who live in daily fear of receiving the next pink slip.

In Wayne Cascio’s book, Responsible Restructuring, he lists many reasons why layoffs are very costly. They include:

>>>  Severance Pay

>>>  Paying out accrued vacation and sick pay

>>>  Outplacement costs

>>>  Higher unemployment insurance taxes

>>>  The costs of rehiring employees when business improves

>>>  Low morale and risk-averse survivors

>>>  Potential lawsuits from former employees

>>>  Low morale and risk-averse survivors

>>>  Diminished trust in management

>>>  Reduced productivity

There is even further evidence to suggest that layoffs do not increase stock price or profitability.  Often, middle management employees are let go first, despite their extensive operational knowledge. Losing their expertise becomes extremely detrimental to business recovery and future growth. While there are times when the strategic decision for downsizing may be necessary, it should not be the first option, and, most notably, it doesn’t have to be.

There are many proven solutions to reducing expenses and improving the bottom line, without having to compromise business operations. A thorough review of your business’s direct and indirect expenses can yield substantial savings. Most companies don’t realize the wasted money that comes along with “average” pricing, contracts that were not properly negotiated or understood, and vendors that have been outgrown. Together, all of these factors contribute to as much as 30% overpayment, money that your business could be putting towards its own successful growth and expansion.

The proven methodology of experts like Strategic Expense Reduction (SER) Partners can save a business a substantial portion of costs without any disruption to your work flow, little to no time commitment, and without any compromise on quality whatsoever.

Finding the best pricing options and renegotiating contracts takes a lot of time and energy. Finding the right people as service providers can take days, trying to determine where there is room to negotiate can lead to frustrations, and finding competitive bids also takes time and research. Partnering with someone who already has relationships with many of your trusted vendors, as well as the necessary skill sets to renegotiate and smartly source, can have a dramatic effect on your bottom line.

At SER Partners, we make saving your business’s money our commitment. Just as in your personal life you shop around for the best mortgage rates, lowest bank fees, printer ink, and food, we make it our mission to do this for your business. Our experts have the experience in procurement that often times are not found in-house. Because of our gain-share business model, it is in our interest to get you the best pricing possible.  The more we save you, the more we earn.

We earn our money the old-fashioned way by providing tangible results. There are absolutely no hourly fees. Allow us to become your trusted Strategic Expense Reduction partner and see what those savings can do for your business.